Saturday, August 06, 2005

Red Sox

Another fun fact on the non-existent US personal savings rate:
In fact, the government's calculation may even overstate how much of a typical paycheck is going into savings.

Any money directed into 401(k) plans is considered to be part of take-home pay in the government calcuation. But that 401(k) money isn't available to spend.

Take a person who contributes 10 percent of income to a 401(k). If the government counts him or her as having a zero savings rate, he or she is actually spending about 10 percent more than the actual take-home pay, liquidating assets or taking on debt to support spending.
On a more important note, however, watch for me in the center field seats today on Channel 29 in the Twin Cities or on NESN in New England -- my first Red Sox game!

20 Comments:

At 10:09 PM, Anonymous Tom Marney said...

"'I find it just odd for all these economists and policy makers to be cheering for all this consumer spending when we're just digging ourselves into a hole,' said Brusca."

He should read General Glut!

 
At 11:52 AM, Anonymous peBird said...

OK - I'm being dense here, but doesn't this mean that the savings rate is higher, but that disposable income is lower?

In a pinch you can liquidate 401(k) savings without the penalty (e.g., medical) - so what's the big deal?

 
At 1:16 PM, Anonymous Movie Guy said...

money.cnn: "Take a person who contributes 10 percent of income to a 401(k). If the government counts him or her as having a zero savings rate, he or she is actually spending about 10 percent more than the actual take-home pay, liquidating assets or taking on debt to support spending."

Does the government have a rollup of all 401(k) monthly contributions? I assume so.

What you have pointed out does paint a darker picture for available disposable income at the household level.

So, how big is the monthly hole? Perhaps another 2-5 percent larger?

 
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